Artificial Intelligence, Digitalization, and Economic Performance: Does Cybersecurity Regulation Matter?

Abstract

This study investigates the effects of artificial intelligence (AI), digitalization, and cybersecurity regulation on economic performance in Pakistan, with a focus on the moderating role of cybersecurity regulation. Using annual data from 2000 to 2025 and an autoregressive distributed lag (ARDL) framework, the study evaluates both direct and conditional effects of technological transformation. The results reveal that AI and digitalization positively affect economic performance, while foreign direct investment, gross fixed capital formation, and trade openness also contribute positively. Cybersecurity regulation exhibits a negative direct effect, indicating potential short-term compliance and adjustment costs. However, the interaction results demonstrate that cybersecurity regulation significantly strengthens the positive effects of both AI and digitalization on economic performance. These findings highlight cybersecurity regulation as a complementary institutional mechanism for technological development. The study recommends integrating AI development, digitalization, and proportionate cybersecurity governance to strengthen digital trust, reduce technological risks, and maximize the economic benefits of Pakistan's digital transformation.